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The U.S. Supreme Court’s decision this week in SAS Institute v. Iancu has upended a major provision of the U.S. Patent and Trademark Office (PTO) regulations for inter partes and post grant review proceedings conducted by its Patent Trial and Appeal Board (PTAB). By concluding in a 5-4 decision that the agency lacks the authority to render partial judgments on petitions that challenge issued patents, the PTO may be forced to overhaul its rules and regulations for implementing a key component of the 2011 patent reforms. (See, SAS Institute v. IancuNo. 16-969, Sup. Ct. April 24, 2018.)

The PTO’s initial reaction has been to issue a Memorandum on April 26, 2018, acknowledging that, going forward, “the PTAB will institute as to all claims or none.” For trials in progress, the memorandum suggests that the PTAB panels may issue supplemental orders and will expect the parties to “work cooperatively amongst themselves to resolve disputes and propose reasonable modifications to trial schedules.” The memo further commits the PTAB to address all challenged claims in its final written decisions.

The 2011 America Invents Act (AIA) created several new administrative procedures to challenge or revise U.S. patents after they have been issued. The most commonly used procedure, Inter Partes Review (IPR) can be brought against any patent issued for more than nine months. The AIA requires the USPTO to conduct IPR proceedings with “dispatch” and, absent extraordinary reasons, a final decision must be rendered within one year of the institution of an IPR. Nearly two thousand IPR decisions have been rendered on patents so far – with nearly a thousand more trials in progress and roughly a thousand more petitions awaiting an initial decision on whether a trial should be instituted.

The SAS Institute case involved an IPR proceeding brought by SAS against a patent issued to one of its competitors, ComplementSoft. SAS sought review of all 16 claims of the patent. Applying the PTO’s existing rules for IPR proceedings, the agency’s Patent Trial and Appeal Board reviewed the petition and concluded that SAS had met the threshold requirement of presenting arguments reasonably likely to succeed as to claims 1 and 3–10 and instituted a trial as to only these claims and declined to review the rest. SAS was ultimately successful in invalidating almost all of the subset of claims on which the trial was conducted but SAS maintained throughout the proceedings that the PTAB had a responsibility to rule on all of the challenged claims, not just the ones that were the subject of the trial.

SAS appealed to the Federal Circuit but the appeals court rejected that SAS’s challenge to the PTAB procedures, setting the stage for Supreme Court Review. In the 5-4 decision handed down this week, the majority opinion written by Justice Gorsuch criticized the PTO for taking liberties when implementing the AIA authorized patent reviews, writing that “whatever its virtues or vices, Congress’ prescribed policy here is clear.”

We find that the plain text of §318(a) supplies a ready answer. It directs that “[i]f an inter partes review is instituted and not dismissed under this chapter, the [Board] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner . . . .” §318(a) (emphasis added). This directive is both mandatory and comprehensive. The word “shall” generally imposes a nondiscretionary duty.

As often the case, the Court split on partisan lines with the four judges appointed by Democratic Presidents dissenting. Justice Ginsburg’s dissenting opinion, joined by Justices Breyer, Sotomayor and Kagan, characterized the majority opinion as a “wooden reading” of the statute. In a second dissenting opinion by Justice Breyer (and also joined by the other dissenters), he concluded that the PTAB’s practice of initiating partial trials was a reasonable exercise of rulemaking authority.

Nonetheless, the majority opinion is now the law of the land and the PTAB has acknowledged that it will abide by it. How the PTAB judges do so, however, remains to be seen. The one-page guidance issued this week offers little in the way of specifics, apart from noting that new trials will be instituted on all claims whether or not the petitioner has met the burden of demonstrating a reasonable likelihood of success as to some of the challenged claims. (One such trial initiation decision was issued yesterday in IPR2018-00082, where a PTAB panel initiated a trial on all claims even though it was not convinced that petitioner, Western Digital, was likely to succeed in its challenge to most of the claims in a patent owned by Spex Technologies.)

If institution as to all challenged claims is inevitable whenever a trial is granted, it is not clear whether the PTAB trial institution decisions will continue to be as comprehensive as is currently the practice with explanations of why some claim challenges fail to pass muster. Moreover, it is also not clear whether there will be more petitions denied in the PTAB’s discretion. As the dissenters in the SAS noted, the Court has previously held that the PTO has essentially unfettered discretion in accepting IPR and PGR petitions and could find some of the claim challenges to be unsupportable and simply reject the entire petition. This could force petitioners to refile (assuming they are not time-barred) with challenges to fewer claims.

With regard to PTAB trials currently underway, it is also not clear whether the Petitioner will have leeway to introduce new evidence or arguments as to the claims that were originally excluded from the proceeding because the PTAB found the petitioner failed to meet the threshold requirement of demonstrating a reasonable likelihood of success. One thing that does appear to be certain, however, is that the petitioner will get a chance to appeal to the Federal Circuit on all claims, not just those that had originally been designated for review at the time the trial commenced.

Finally, the new regime may change the likelihood of federal district court judges granting stays in underlying patent infringement suits. At present, some judges in infringement actions are unwilling to grant a stay pending the outcome of an IPR proceeding if any of the claims asserted in the infringement suit areculled by the PTAB from its review. Since partial review by the PTAB is no longer an option, district courts may be more willing to stay their proceedings until all the dust settles at the PTAB.